5/26

Question 1

The purpose of sending standard confirmation requests to financial institutions with which the client has done business during the year is

Answer 1

Corroborate information regarding deposit and loan balances.

Question 2

Before applying substantive tests to the details of asset accounts at an interim date, an auditor should

Answer 2

Assess the difficulty in controlling the incremental audit risk.

Question 3

What is true about the auditor’s observation of physical inventory counts

Answer 3

It can provide evidence supporting the existence assertion

It can provide evidence supporting the completeness assertion

Question 4

What evidence would an auditor likely examine to determine whether internal controls are operating as designed

Answer 4

Client records documenting the use of EDP programs

Question 5

What component of an entity’s internal control includes the development of personnel manuals documenting employee promotion and training policies?

Answer 5

Control environment. Relates to the tone of the organization, HR policies and practices

Question 6

Before reissuing the prior year’s auditor report on the FS of a former client, the predecessor auditor should obtain letters of representation from the

Answer 6

Successor auditor and the former client’s management.

Question 7

An entity with a large number of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using

Answer 7

A bank lockbox system.

Question 8

In evaluating the adequacy of the allowance for doubtful accounts, an auditor most likely reviews the entity’s aging of receivables to support management’s FS assertion of

Answer 8

Valuation and allocation. Are net receivables properly valued.

Question 9

Previous audit expressed qualified opinion due to a scope limitation. You decide to include a separate paragraph in the year 2 review report because comparative FS are being presented. This separate paragraph should include

Answer 9

Substantive reasons for the prior year’s qualified opinion

Question 10

According to the SEC, other audit partners should rotate off the engagement after

Answer 10

7 years

Question 11

According to the SEC, lead partners and concurring partners are subject to a ____ time out period

Answer 11

5 year

Question 12

Under SEC rules covered persons include those in the chain of command who provide ____ or more hours of non-audit services

Answer 12

10 hours

Question 13

The PCAOB will conduct annual inspections of registered public accounting firms that regularly provide audit reports for more than

Answer 13

100 issuers

Question 14

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually

Answer 14

Performs tests of controls and limited tests of current year property and equipment transactions.

Question 15

A successor auditor should request the new client to authorize the predecessor auditor to allow a review of the predecessor’s

Answer 15

Work papers

no review of EL

Question 16

PY CPA had doubt about going concern. It is removed this year. What is the responsibility if presenting comparative FS

Answer 16

Separate going concern section included in the PY report. Do not repeat in CY

Question 17

Reporting standards for financial audits under Government Auditing Standards differ from reporting standards under generally accepted auditing standards in that Government Auditing Standards require the Auditor to

Answer 17

Describe the scope of the auditor’s tests of compliance with laws and regulations

Question 18

Section 404 of the Sarbanes Oxley Act of 2002 requires each annual report of an issuer to includes

Answer 18

Management’s assessment of the effectiveness of internal control over financial reporting

Question 19

After obtaining an understanding of internal control and performing risk assessment procedures, an auditor decided not to perform tests of controls. The auditor most likely concluded

Answer 19

Additional evidence to support a reduction in control risk was not cost beneficial

Question 20

What professional services would be considered an attest engagement covered by Statements on Standards for Attestation Engagements SSAE

Answer 20

An engagement to report on management’s discussion and analysis

Question 21

The degree of audit risk always present in an audit engagement is referred to as a combination of nonsampling and sampling risks. What is an example of nonsampling risk

Answer 21

The auditor selecting inappropriate auditing procedures.

using inappropriate audit evidence, failure to recognize misstatements in documentation.

Question 22

According to ethical standards, a CPA’s independence would most likely be impaired if

Answer 22

Contracted with a client to supervise client office personnel.

Impaired if you make management decisions on behalf of the client.

Question 23

Auditor decides to perform substantive tests on PPE as of interim date. What additional work must be performed to extend the audit conclusions from interim to BS date

Answer 23

Substantive procedures for the period between the interim and BS date.

Question 24

For classic variable sampling for estimates, an auditor normally evaluates sampling results by calculating the possible error in either direction. This concept is

Answer 24

Precision.

Question 25

What is the best type of visualization when performing a trend analysis

Answer 25

Line chart

Question 26

What is a concept difference between the attestation standards and generally accepted auditing standards?

Answer 26

Attestation standards provide a framework for the attest function beyond historical FS.

Question 27

What documentation is not required for an audit in accordance with GAAS

Answer 27

The basis for the auditors decision to not perform tests of controls concurrently with obtaining an understanding of internal control.

Auditor is not required to evaluate operating effectiveness

Question 28

What is true for a CPA may or may not disclose the names of its clients without permission

Answer 28

Firm may disclose unless disclosure would suggest that the client may be experiencing financial difficulties.

Question 29

When there is substantial doubt paragraph, the section must include the terms

Answer 29

Substantial doubt & Going Concern.

Question 30

Under Government Auditing Standards, when a clients audit committee takes no action to report fraud

Answer 30

The auditor has the responsibility to communicate fraud to individuals contracting for or requesting the audit